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United Kingdom

Capital: London
Largest city: London
Official Language: English
Government: Unitary parliamentary constitutional monarchy
Area: 242,495 km2
Population: 67,886,004
Currency: Pound Sterling (GBP)
GDP total: GBP2.215 trillion (USD3.124 trillion)
GDP per capita: GBP33396.46 (USD47,089)
Time zone: UTC/ UTC +1
Calling code: +44
Internet TLD: .uk

[Source: Wikipedia]

Total Foreign Investment in the United Kingdom
2018: USD1.930 trillion (GBP1.36 trillion)
2019: USD2 trillion (GBP1.41 trillion) with the top 3 foreign countries being the United States, the British offshore islands and the Netherlands

[Source: santandertrade.com/ UNCTAD’s 2020 World Investment Report]

 

3 largest trading partners: United States, Germany and Ireland
Top 3 exports: Cars, Gold (unwrought) and Turbo jets

[Source: worldstopexports.com]

Q&A on Foreign Investment
  1. Are there any foreign investment laws in the UK?
    At present, there is no legislation governing foreign investment although such transactions must comply with the domestic merger control regime set out in the Enterprise Act 2002 and other applicable domestic legislation.
    However, the UK has recently begun to strengthen its foreign direct investment (“FDI”) regime – particularly through the introduction of a new government bill named the National Security and Investment Bill, which is currently going through the committee stage at the House of Lords.
    The purpose of the new legislation will be for the government to be able to intervene and block investors in hostile states from taking over UK companies. It is worth noting that this legislation is intended to have a retrospective effect (which means that past transactions may be subject to review after the intended introduction of the Bill).
  2. Is there a governing or regulatory body responsible for overseeing foreign investment in the UK?
    There is not currently a single body responsible for foreign investment. A new Office for Investment was launched on 9 November 2020 as part of the Department for International Trade but is primarily to facilitate and encourage larger investments into the UK and to resolve potential issues and constraints related to such transactions.
    However, some regulations may apply depending on the circumstances of the investment. By way of example, if an entity regulated by the UK’s Financial Conduct Authority (“FCA”) is acquired, then FCA approval will be required.
    As mentioned above, the new National Security and Investment Bill will introduce tighter controls of these investments and the ability for the government to intervene in such transactions, where necessary.
  3. What restrictions exist in the UK on foreign investment?
    In general, there are no restrictions except in specific situations such as the above-mentioned FCA regulation (for example, in the case of banks or insurance companies) or those industries which are government-controlled (for example, transport or energy sectors), in relation to which transactions will be subject to a higher level of government scrutiny
    Foreign companies are currently treated in the same way as UK companies, meaning they must comply with local competition and regulatory laws.
  4. Which industries do these restrictions apply to (if any)?
    As mentioned above, restrictions apply to partially government-owned or controlled industries, such as those in the transport and energy sectors.
    Banking and insurance enterprises must obtain FCA and government authorisation before operating in the UK.
  5. Can foreign investors acquire real estate/ property/ land in the UK?
    There are currently no restrictions on acquiring UK real estate by foreign investors (although they should be mindful of international sanctions).
    Whilst the UK government do not impose any restrictions as such, foreign investors may be more restricted when purchasing property in the UK owing to mortgage lenders reluctance to lend to non-UK residents.
    That said, as of 1 April 2021, a new 2% stamp duty tax charge applies for non-UK residents applies (on top of the existing rate of tax which is calculated on the value of the property). Like first time buyers in the UK foreign investors purchasing their first UK property can also claim tax relief and pay no stamp duty on a property valued at less than £300,000 but they will still have to pay the 2% surcharge.
    It is also worth noting that new legislation proposed in the Draft Registration of Overseas Entities Bill of July 2018, which will require overseas entities that buy real estate in the UK to provide information about their beneficial owners, is due to come into force in 2021.
  6. Are there any sanctions or restrictions on foreign investors from certain countries?
    The National Security and Investment Bill seeks to address these matters, particularly in light of recent concerns regarding certain foreign investors.
    In addition, the UK Government may be able to block investments from certain countries under the international sanctions regime.
  7. Are any governmental approvals required for foreign investment in the UK?
    As mentioned above, government approval is not required for foreign investment in the UK. However, the National Security and Investment Bill will allow the UK Government to intervene and block investors in hostile states from taking over UK companies. As such, whilst approval is not required as a blanket rule, greater scrutiny of foreign investment is likely to be implemented in the future.
    In turn, it will be best practice to undertake a more extensive preliminary review to ascertain whether there are any risks to the transaction in question.
  8. What are the common types of foreign investment in the UK?
    A large proportion of FDI in the UK is related to the financial services sector (the UK being a world leader in this area), professional, scientific and technical services, information technology, trade and repair as well as transportation.
    Property investment remains a common type of inward investment in the UK, largely owing to the fact that there is in the main parity between domestic and foreign investors.
  9. What are the common business entities open to foreign investors?
    As is explored in the questions below, many of the benefits of investment in the UK flow from the ability of companies with a UK centre of interest to benefit from the UK’s corporation tax relief schemes, regardless of the country of origin of the company or the nationality of its owners.
    As a result, the most common business entity in the UK is a private company limited by shares. By utilising this business vehicle, investors will potentially be able to take advantage of a range of tax relief schemes, as well as ensuring the company remains a separate legal entity and thereby enjoys the benefits of limited liability.
    The relative ease and speed of setting up a private company limited by shares in the UK is also a big draw for this type of business entity.
    Whilst a private company limited by shares is the most common business entity in the UK owing to its practicality, all other vehicles are open to foreign investors. These include:
    (i) Sole Traders;
    (ii) Private companies limited by guarantee
    (iii) Private unlimited companies; and
    (iv) Public companies.
  10. Are there any tax advantages for foreign investment in the UK?
    Foreign investors that incur the liability to pay UK corporation tax (currently at 19%) can enjoy the same tax advantages which domestic investors enjoy. Some examples of such tax schemes are listed briefly below:

    • The Patent Box – Corporation tax relief granted on profits earned from exploiting patented inventions;
    • Research and Development (“R&D”) Relief – Corporation tax relief on projects intended to achieve advances in science and technology;
    • Creative Industry Tax Reliefs – To encourage business in creative industries, companies can claim an 80% ‘super deduction’ for core expenditure. Losses may also be surrendered for a payable tax credit of up to 25%;
    • Business Investment Relief – Applies to non-UK domiciled UK residents claiming remittance basis taxation, who invest foreign income in a qualifying target company. No tax is levied on the foreign income invested;
    • Venture Capital Trusts (“VCT”) Relief – Exemption from income tax on dividends. Income tax relief at 30% of the amount invested (up to GBP200,000 annually) as well as relief from Capital Gains Tax (CGT) on the disposal of shares;
    • Enterprise Investment Scheme (“EIS”) Relief – Income tax relief of 30% on up to GBP1 million investment, as well as a CGT exemption on the disposal of shares;
    • Seed Enterprise Investment Scheme (“SEIS”) Relief – Income tax relief at 50% on up to GBP100,000 investment, as well as CGT exemption on the disposal of shares.
  11. Are there any incentives for foreign investors in the UK?
    The foremost incentives which the UK uses to draw in foreign investment are the tax incentives listed above, as well as the access provided to integrated markets by virtue of doing business in the UK.
  12. Are there any free trade zones in the UK which are attractive to Foreign Investors?
    Whilst none are presently active, eight English ports are set to become ‘freeports’ by the end of 2021. This means that no tariffs will be payable on goods entering the freeports and will only become payable once goods are moved out of the freeports.
    The freeports will also provide tax breaks to businesses located within the area, including no stamp duty, full rebates for construction and machinery investment, and five years of zero business rates.
    It is yet to be seen whether the freeports will have the desired impact of bringing trade and investment to the areas in which they are located, or whether such investment will merely be relocated from one area of the UK to another.
  13. Can foreign investors obtain work visas in the UK?
    Yes, foreign investors can apply for a Tier 1 (Investor) visa. To do so, an applicant must have at least a GBP2,000,000 investment and meet the following criteria:

    • be 18 or over;
    • be able to prove that the money belongs to either them or their husband, wife, unmarried or same-sex partner; and
    • have opened an account at a UK regulated bank to use for their funds

    The funds must be held in one or more UK regulated financial institutions and be disposable in the UK. However, the money can be in the UK or overseas when the application is made.

  14. Are there any foreign currency or exchange controls regulations in the UK relating to foreign investment?
    No, none have been in place for many years in the UK. However, there has been speculation of the potential return of a foreign currency exchange control following Brexit.
  15. Can foreign investors invest in government projects? If so, are there any restrictions or penalties imposed on the withdrawal of such investments?
    Yes. In fact, the new Office for Investment was introduced in November 2020 to drive foreign investment into the UK in this way. As earlier stated, however, such investments are likely to be placed under greater scrutiny.
    In fact, a list of potential investment opportunities is regularly published on the website for the Department for International Trade:
    https://www.gov.uk/government/organisations/department-for-international-trade
  16. Are there any safeguards or investor protection frameworks in place in the UK for foreign investors?
    The Financial Services Compensation Scheme protects certain amounts in the event that an authorised financial services firm fails. The Scheme protects ‘Temporary High Balances’, which can amount up to GBP1 million. The period over which such Temporary High Balances are protected was increased last year in light of the COVID-19 pandemic from 6 months to 12 months.
    The UK government has no track record of expropriating assets without compensation.
  17. Is the UK a signatory to any investment protection treaties with any countries?
    Yes, the UK is a party to a number of Bilateral Investment Treaties (“BITs”) and Multilateral Investment Treaties (“MITs”) – for example, the Energy Charter Treaty.
  18. Have there been any recent changes in law or developments for reform that may affect foreign investment in the UK?
    As mentioned above, the new National Security and Investment Bill will ensure that the Government can intervene and block investors in hostile states from taking over UK companies. As a result, it will be best practice to undertake a more extensive preliminary review to ascertain whether there are any risks to the transaction in question.
    Evidently, the UK’s exit from the European Union will likely have an impact on foreign investment and such developments will need to be closely monitored.
  19. What tips are there for foreign investors to be aware of when dealing with foreign investment in the UK?
    In light of Brexit and the Covid-19 Pandemic, the position as to foreign investment in the UK is ever-evolving. As a result, there will likely be an increasing number of new regulations and laws emerging in 2021 and beyond.
    It is therefore essential for foreign investors to have sufficient local knowledge and seek early advice which is why obtaining assistance from UK-based lawyers is paramount before undertaking any such dealings.
ABOUT THE AUTHORS

Niten Chauhan
Partner, Dispute Resolution and Head of Insolvency & Restructuring, JPC

Niten trained in the City of London and qualified in 2006. Prior to becoming a solicitor he worked with a multinational firm of accountants and a global investment bank. This financial experience coupled with a strong legal acumen led him to a career in Commercial Litigation and Dispute Resolution with a particular specialism in Insolvency.

Niten is Head of the firm’s Insolvency and Restructuring department where his particular strengths lie in dealing with corporate insolvency matters from Liquidations to Administrations.

In addition, he is a Partner in the Dispute Resolution department in which he undertakes all aspects of litigious work and acts for a multitude of clients, both foreign and domestic with cases.

Niten also has an expertise in cases of civil fraud particularly involving properties and identity theft. He was the lead Partner in P&P Property Ltd v Owen White & Catlin LLP [2018] EWCA Civ 1082 (15 May 2018), a case of property fraud which was widely publicised after he achieved a successful outcome for his clients before the Court of Appeal in May 2018.

Furthermore, as the firm’s International Partner, Niten acts for clients globally in varying matters from high value contractual disputes to shipping arbitration cases.

Irina Apekisheva
Solicitor, Dispute Resolution, JPC

Irina is a solicitor in JPC’s Dispute Resolution Team, dealing with all aspects of commercial and property litigation, including contract claims, injunctions, intellectual property matters, construction disputes, professional negligence and landlord and tenant disputes.
Following her studies at the University of Law where she gained Distinction in her LPC, she completed her training contract at a top 100 London firm focussing on commercial litigation, property and private client work.

Examples of some of the cases Irina has been involved in are as follows:

  • Successfully defending a construction adjudication matter worth over £1.5m
  • Advising a prominent artist on his intellectual property rights claim
  • Advising a client in respect of a GDPR dispute with a British regulator, the parties reached settlement before trial.
  • Representing a client in respect of defending injunction proceedings, the matter was settled on the terms favourable to the client

Irina understands the importance of resolving clients’ disputes in the most cost-effective way possible and strives to understand their objective at an early stage. She is committed to providing high quality legal advice in a way that is easily understood.

ABOUT THE FIRM

Name: JPC
Address: North London office: Omni House, 252 Belsize Road, London NW6 4BT Central London office: 34 Sumner Place, London SW7 3NT
Telephone: +44 (0) 20 7625 4424
Email: enquiries@jpclaw.co.uk
Website address: https://www.jpclaw.co.uk/
Key contact: Niten Chauhan, Partner, nchauhan@jpclaw.co.uk
Established: 2007
Number of lawyers: 24
Languages: English, French, Gujurati, Russian, Turkish

Brief description:
JPC is a Legal 500 practice which covers the full spectrum of commercial law for businesses and individuals both in the UK and overseas and maintains strong professional relationships through its international networks and continues to develop the same as a result of its growing global presence.

Key practice areas:
Corporate, Dispute Resolution, Insolvency and Restructuring, Employment, Private Client, Real Estate

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